India Consumer Spending To Rise Three-Fold To $4 Trillion By 2025

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India is striving to become the world’s third-largest consumer market by 2025. Consumer spending is on the rise in India. The country is currently ranked eighth largest consumer market, according to the World Bank.

India has a population of 1.3 billion and half of those people are under the age of 25. India’s per capita income is still very low compared to developed countries, but it grew by close to 10 percent to 103,219 rupees in the financial year to the end of March compared to the previous year.

Boston consulting group projects that total consumption spend in India will rise three-fold to $4 trillion by 2025, growing at more than double the global rate over the coming years.

“India is probably now the most aspirational country,” says Sridhar Gundaiah, the founder and chief executive of StoreKing, an online shopping platform with a network of 50,000 retailers in small towns and villages across 10 states in the country.

Urbanization Helping To Drive Consumption Growth

Urbanization is also helping to drive consumption growth. The rural populations are also seeking to replicate the lifestyles of those in the cities, as they become more exposed to these trends and are increasingly targeted by consumer goods companies.

Brands such as Zara, Samsung and Nestle are among those that have penetrated to India to tap into rising consumer spending.

Management in Chennai said, “we would become the third-largest market is just because, as things stand now, there doesn’t seem to be another country that can ramp up as fast as we can other than the United States and China.” India gaining increased access to electricity is also helping to drive demand for electronic goods, he adds.

The economic liberalization of the 1990s in India opened up the market, leading to a number of foreign brands entering the country and creating more choice for consumers.

Foreign direct investment rules have been further relaxed in recent years.

India Still Lives In Poverty

But there is still a very large percentage of the population that lives in poverty. There are 224 million who live below the $1.90 per day poverty line in India, according to the World Bank.

There are estimates that more than 40 percent of Mumbai’s population lives in slums. The residents of these areas would not even be able to gain access to large malls. “The income divide is likely to continue and the majority consumption spending would come from the top half.” Higher fuel and food costs have already slapped India’s poverty stricken hard, with inflation rising to a 14-month high of 4.43 percent in May.

The Indian government’s controversial demonetization impacted consumer spending, but India is now emerging from this.

E-Commerce Market

Indian women have started gaining more power now, and have been influencing their families and society, both in urban and rural parts of the country.

The rise of internet use in the country, with Indians having access to cheaper smartphones and data, is boosting the e-commerce market in the country, giving people more opportunities to spend.

Credit is also increasing consumption. Mobile wallets, credit cards have greater access to the banking network. The potential of the e-commerce sector is reflected in the fact that US retail major Walmart last month announced that it was buying a majority stake in the Bangalore-based online marketplace Flipkart, the country’s homegrown answer to Amazon.

The consumer durables market in India is estimated to have reached Rs 1 trillion (US$ 15.5 billion) in 2017.

India is one of the largest growing electronics market in the world. Indian electronics market is expected to grow at 41 percent CAGR between 2017-20 to reach US$ 400 billion.

Consumer Durable Market

Indian consumer durables market is broadly divided into urban and rural markets, and is attracting marketers from across the world.

The sector comprises of a huge middle class, relatively large affluent class and a small economically disadvantaged class, with spending anticipated to more than double by 2025.

Global corporations view India as one of the key markets from where future growth is likely to emerge. Per capita GDP of India is expected to reach US$ 3,273.85 in 2023 from US$ 1,983 in 2012. The maximum consumer spending is likely to occur in food, housing, consumer durables, and transport and communication sectors.

Indian appliance and consumer electronics (ACE) market is expected to increase at a 9 per cent CAGR to reach Rs 3.15 trillion (US$ 48.37 billion) in 2022. Demand growth is likely to accelerate with rising disposable incomes and easy access to credit. Increasing electrification of rural areas and wide usability of online sales would also aid growth in demand.

Digital Consumer Spending

Digital consumer spending in India is expected to grow 2.5 times from USD 40 billion to USD 100 billion by 2020, said the report of Boston Consulting Group (BCG) and Google. The growth is expected to be led by sectors such as e-commerce (USD 18-45 billion), travel and hotel (USD 11-20 billion), financial services (USD 12-30 billion) and digital media (USD 200-570 million).

The report also said that women and new users from non-Tier 1 cities will drive this growth. Consumer spending in apps will grow 92 percent by 2022, reaching $156.5 billion.

The top countries in consumer spending in 2022 will be China, the US, Japan, South Korea, and Germany. China will be far in the lead, growing 107 percent from 2017 to reach $62.4 billion, compared with the US’s 97 percent growth from $15 billion to $29.7 billion.

Average spending per device will grow 23 percent by 2022, to reach $25.65.

Japan’s spend per device will top $140 by 2022 – nearly six times the global average, and by far the highest worldwide. The US will see its spending per device nearly double by 2022 when it tops $60, by comparison.

Games, of course, will remain the main source of consumer spending, but other apps will gain ground from 2017 to 2022. During this time, spend outside of games will increase by $75 billion. This will be due to subscription revenue growth in dating apps and music and video streaming apps.

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